Dominic Frederico President Chief Executive Officer Assured Guaranty by xkv17320

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									Keefe, Bruyette & Woods
2008 Insurance Conference
September 3, 2008
Dominic Frederico
President & Chief Executive Officer
Assured Guaranty Ltd.
Safe Harbor Disclosure


    Any forward-looking statements made in this presentation reflect the Company’s current views with respect to
    future events and financial performance and are made pursuant to the safe harbor provisions of the Private
    Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual
    results to differ materially from those set forth in these statements. For example, the Company’s forward-looking
    statements, including its calculations of adjusted book value, present value of financial guaranty and credit
    derivative gross written premiums ("PVP"), net present value of estimated future installment premiums in force,
    total estimated net future premium earnings, and statements regarding losses, pricing, ratings, capital adequacy
    and the growth of financial guaranty business could be affected by many events. These events include a
    significant reduction in the amount of reinsurance ceded to us, rating agency action such as a ratings downgrade,
    difficulties with the execution of the Company’s business strategy, contract cancellations, developments or volatility
    in the world’s financial and capital markets, more severe or frequent losses associated with products affecting the
    adequacy of the Company’s loss reserves, changes in regulation or tax laws, governmental actions, natural
    catastrophes, the Company’s dependence on customers, decreased demand or increased competition, loss of key
    personnel, technological developments, the effects of mergers, acquisitions and divestitures, changes in
    accounting policies or practices, changes in general economic conditions, other risks and uncertainties that have
    not been identified at this time, management’s response to these factors, and other risk factors identified in the
    Company’s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue
    reliance on these forward-looking statements which are made as of September 3, 2008. Assured does not
    undertake to publicly update or revise any forward-looking statements, whether as a result of new information,
    future events or otherwise.




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Assured Guaranty Ltd.


    •   Our sole focus is financial guaranty
          -   20 year track record in financial guaranty market
          -   No muni GIC, financial product or investment management subsidiaries
          -   Largest financial guaranty reinsurer
          -   Focused on growing financial guaranty direct since our 2004 IPO
          -   Active in public and structured finance markets; significant public finance expansion in 2008


    •   Strong capitalization
          -   GAAP equity of $2.2 billion as of June 30, 2008, second highest in the industry
          -   Assured Guaranty Corp. had $120 million in excess capital to meet Moody’s Aaa
              requirement as of July 21, 2008
          -   AG Re had over $300 million in excess capital to meet Moody’s Aa2 capital requirement as
              of July 21, 2008
          -   AGC meets AAA thresholds for S&P and Fitch




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Moody’s Issues: Assured

    •   “According to Moody’s, recent events have demonstrated that the leverage and
        complexity of certain structured finance transactions have made loss estimations
        difficult.” Moody’s press release, July 21, 2008
          -   Moody’s rates 95% of our $40 billion pooled corporate book themselves
          -   Moody’s rates over 84% of pooled corporate book Aaa
          -   August 1, 2008 report by Moody’s on CLOs noted: “typical investment-grade CLO tranches, especially
              Aaa tranches, can withstand some of the most stressful corporate credit scenario’s in history.”
          -   Assured’s internal analysis indicates losses of less than $100 million even if 50% of the underlying
              exposures default


    •   Assured has “large single and sectoral risk concentrations, which Moody’s considers
        to be higher than other highly-rated financial guarantors.” Moody’s press release, July
        21, 2008
          -   “Moody's said that Assured's conservative underwriting strategy and expansion into the municipal
              market have resulted in a generally high-quality and diversified insured portfolio…” Moody’s press
              release, July 21, 2008
          -   Our exposure limits are within Moody’s thresholds under the current rating methodology




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Moody’s Issues: Industry


    •   Moody’s has expressed concern over decline in demand for insurance
          -   Strong demand for AAA companies
          -   Due to strong and improving trading value and broader market acceptance, Assured’s monthly insured
              market share has trended upward during 2008 averaging 34% in the first seven months of 2008,
              ending with 44.5% for the month of July
          -   Only two of the seven bond insurers that were triple-AAA (stable) last year are writing new direct U.S.
              public finance business
          -   With only three main players in the bond insurance industry, insured penetration was still 5 percentage
              points higher than LOCs the first seven months of the year


    •   Moody’s worries about long-term demand for credit enhancement are speculative
          -   Investor demand for credit enhancement is strong, with 39.8% of U.S. public finance issuance having
              FG or letter of credit enhancement for first seven months of 2008
          -   Banks capacity to insure is much more constrained than bond insurers while LOCs are more
              expensive to issuers
          -   Biggest issue is lack of new issuance activity in SF markets – it’s difficult to measure insured demand
              in a disrupted market




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Assured’s Alternatives


    •   Assured remains committed to maintaining the highest ratings in the financial
        guaranty industry
          -   Assured willing to adjust risk limits if necessary


    •   Our desire is to retain triple-A ratings for the direct company and AA for reinsurance
        and to remain active in both public and structured finance markets

    •   We are analyzing alternatives with respect to business prospects and shareholder
        returns

    •   Assured has achieved success with impaired ratings when competition was tougher




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Strong Earnings Model


    Ratio of Estimated Future Earned Premiums1 to GAAP
              Equity Adjusted for Mark-to-Market2                                                        •    Assured’s existing premium base
                                                                                                              provides a strong revenue base

                                                                                                         •    Assured has built a pipeline of
                                                         1.09x          1.16x                                 future premiums
                                         0.95x                                                                     -    $1.2 billion of unearned premium
                                                                                                                        reserves as of June 30, 2008
                                                                                                                   -    $1.0 billion of present value of
          0.66x           0.62x                                                                                         estimated future installment
                                                                                                                        premiums3


                                                                                                         •    Our earnings leverage exceeds
                                                                                                              most of our peers’ 2006 leverage,
                                                                                                              a time when their ROEs were in
                                                                                                              12-15% range
                               2            2     2
                      2                                                                                                 MBIA2 0.86x
            2004           2005 Assured 2007 2Q-08
                                 20062                                                                             -
                                                                                                                   -    Ambac2 1.02x




    1.   Estimated future earned premiums is net unearned premium reserves plus estimated future installment premiums (calculations for 2004 and 2005 include statutory
         unearned premium reserves and net present value of estimated future installment premiums3)
    2.   MBIA, Ambac, 2004, 2005, 2006, 2007 and 2Q-08 GAAP equity is adjusted for net unrealized mark-to-market gains/(losses) on credit derivatives
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    3.   Please refer to the appendix for explanation of non-GAAP financial measures [net present value of estimated future installment premiums in force].
Capital and Financial Overview
Bob Mills
Chief Financial Officer
Assured Guaranty Ltd.
Financial Results

($ in millions, except per share data)
                                                                                   Quarter Ended June 30,                     % Change vs. 2Q-07
                                                                                    2008            2007
     Net earned premiums                                                             $52                    $38                          36%
     Realized gains and other settlements on credit derivatives                       32                     16                          96%
     Net investment income                                                            40                     31                          30%
     Total revenues                                                                  118                     84                          40%
     Loss & LAE on FG                                                                 38                     (10)                          NM
     Total expenses                                                                   78                     27                         186%
     Operating income 1                                                               39                     47                        (17%)
                             1
     Operating income per diluted share                                              0.42                   0.68                       (38%)
                         1
     Operating ROE (ex-AOCI and FAS 133)                                             7.0%                  11.3%
     After-tax gain (loss) on investments / derivatives                              507                     (14)                          NM
     Net income                                                                      545                     33                            NM
                   1
     Net income per diluted share                                                    5.97                   0.47                           NM

     ROE (ex-AOCI)                                                                 118.7%                   7.9%                           NM


NM = Not meaningful
1. For an explanation of operating income and operating ROE, both non-GAAP financial measures, and a reconciliation of operating income to net income,
which is the most comparable GAAP term, please refer to the appendix.

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Book Value Per Share Growth Since IPO

                                                        Adjusted Book Value1 Per Share

                                                                                                                                                              $42.05
                                                                                      se
     $40                                                              67%      increa
                                                                                                       $36.57                      $36.85
                                                                                                                                                               $8.81

                                                                           $30.39                       $6.71                      $9.00
     $30                                       $27.38
                                                                            $4.38                                                                              $8.58
                   $25.16                                                                               $5.42
                                                $3.93
                    $3.45                                                   $3.79                                                  $7.01
                                                $3.26
     $20            $2.99



                                                                                                       $24.44                                                 $24.66
                                                                           $22.22                                                  $20.85
     $10           $18.73                      $20.19




     $0
                                                                                                                                             2
                    2Q-04                     YE 2004                     YE 2005 1                   YE 2006                   YE 2007                       2Q-08 2
                  Net present value of estimated future installment premiums in force per share, after tax

                  Unearned premium reserve less prepaid reinsurance and deferred acquisitions costs after tax and net unearned revenue on
                  credit derivatives, after tax
                  Book value per share
      1. For explanations of adjusted book value and net present value of estimated future installment premiums in force, which is a non-GAAP financial measure, please refer to
         the appendix.
      2. The Company’s book value per share as of 12/31/07 and 06/30/08 was reduced by approximately $5.59 and $1.29 per share, respectively, due to after-tax unrealized
         losses on credit derivatives and a fair value gain on Assured Guaranty Corp.’s committed capital securities
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Credit Environment



     •   Credit trends in overall portfolio were more stable in 2Q-08
           -   Only $77 million increase in CMC list


     •   U.S. RMBS, particularly in prime second-lien portfolio, is the principal area of focus for
         Assured
           -   55.1% of CMC is U.S. RMBS
           -   46.8% of CMC list is U.S. prime second-lien
           -   75.2% of all U.S. prime second-lien is on CMC list


     •   On the two direct Countrywide deals, we continue to expect that the range of after-tax
         losses will not exceed $100 million




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Rating Agency Capital Adequacy



                                    Rating Agency                Capital Ratio Company
 Assured Guaranty Corp.     AAA     Capital Ratio Calculations   Estimate for
                                    (date of NPO)                June 30, 2008
 Moody’s
                            1.3x    1.4x (6/30/08)               1.4x

 S&P
                            1.25x   1.4x-1.5x (12/31/07)         1.4x – 1.5x

 Fitch
                            1.0x    1.07x (09/30/07)             1.05x – 1.10x

 Assured Guaranty Re Ltd.   AA

                                    1.4x (6/30/08)
 Moody’s                    1.3x                                 1.4x

                                    1.6x-1.7x (12/31/07)
 S&P                        1.0x                                 1.7x – 1.8x




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Appendix
Appendix: Explanation of Non-GAAP
Financial Measures
Adjusted book value, which is a non-GAAP financial measure, is defined as shareholders’ equity (book value) plus the after-tax value of the unearned premium reserve
net of prepaid reinsurance premiums, plus the net present value of estimated future installment premiums in force, less future ceding commissions, after tax discounted at
6%, less deferred acquisition costs, after tax. Management believes that adjusted book value is a useful measure for management, equity analysts and investors
because the calculation of adjusted book value permits an evaluation of the net present value of the Company’s in-force premiums and capital base. The premiums
described above will be earned in future periods, but may differ materially from the estimated amounts used in determining current adjusted book value due to changes in
market interest rates, refinancing or refunding activity, prepayment speeds, policy changes or terminations, credit defaults, and other factors that management cannot
control or predict. This measure should not be viewed as a substitute for book value determined in accordance with GAAP.

Operating income, which is a non-GAAP financial measure, is defined as net income (loss) excluding i) after-tax realized gains (losses) on investments and ii) after-tax
unrealized gains (losses) on credit derivatives and the fair value adjustment of the Company's committed capital securities, other than the Company’s net estimate of
after-tax incurred case and portfolio loss and loss adjusted expense reserves for credit derivatives. Operating return on equity (ROE) represents operating income as a
percentage of average shareholders' equity, excluding accumulated other comprehensive income and after-tax unrealized gains (losses) on credit derivatives.
Management believes that operating income and operating ROE are useful measures for management, investors and analysts because the presentation of operating
income and operating ROE enhance the understanding of Assured's results of operations by highlighting the underlying profitability of Assured's business. Realized gains
(losses) on investments and unrealized gains (losses) on credit derivatives and the fair value adjustment of the Company's committed capital securities, other than the
portion attributable to the Company's net estimate of incurred case and portfolio loss and loss adjustment expense reserves for credit derivatives, are excluded because
the amount of both of these gains (losses) is heavily influenced by, and fluctuates, in part, according to market interest rates, credit spreads and other factors that
management cannot control or predict. These measures should not be viewed as substitutes for net income (loss) or ROE determined in accordance with GAAP.

Present value of gross written premiums or PVP, which is a non-GAAP financial measure, is defined as gross upfront and installment premiums received and the present
value of gross estimated future installment premiums, on contracts written in the current period, discounted at 6% per year. Management believes that PVP is a useful
measure for management, equity analysts and investors because it permits the evaluation of the value of new business production for Assured by taking into account the
value of estimated future installment premiums on new contracts underwritten in a reporting period, which GAAP gross premiums written does not adequately measure.
Actual future net earned or written premiums may differ from PVP due to factors such as prepayments, amortizations, refundings, contract terminations or defaults that
may or may not be influenced by market interest rates, refinancing or refunding activity, prepayment speeds, policy changes or terminations, credit defaults, or other
factors that management cannot control or predict. This measure should not be viewed as a substitute for gross written premiums determined in accordance with GAAP.

Net present value of estimated future installment premiums in force, which is a non-GAAP financial measure, is defined as the present value of estimated future
installment premiums from our in-force book of business, net of reinsurance and discounted at 6%. Management believes that net present value of estimated future
installment premiums in force is a useful measure for management, equity analysts and investors because it permits an evaluation of the value of future estimated
installment premiums. Estimated future premiums may change from period to period due to changes in par outstanding, maturity, or other factors that management
cannot control or predict that result from market interest rates, refinancing or refunding activity, prepayment speeds, policy changes or terminations, credit defaults, or
other factors. There is no comparable GAAP financial measure.

For adjusted book value, net present value of estimated future installment premiums in force, and PVP, Assured uses 6% as the present value discount rate because it is
the approximate taxable equivalent yield on Assured's investment portfolio for the periods presented.


 15
Appendix: PVP1 – Reconciliation to
Gross Written Premiums2

($ in millions)




                                                                          Quarter Ended                % Change       Six Months Ended       % Change
                                                                             June 30,                   versus             June 30,           versus
                                                                        2008          2007              2Q-07         2008          2007     YTD 2007
  Gross written premiums (GWP) analysis:
  Present value of financial guaranty and credit derivative GWP
  (PVP)                                                             $     278.9     $     125.3           123%    $     555.5   $    232.1      139%
  Less: PVP of credit derivatives                                          52.3            39.2             33%         145.8         79.5        83%
  PVP of financial guaranty GWP                                           226.6            86.1           163%          409.7        152.6      168%
  Less: Financial guaranty installment premium PVP                         14.8            33.7           (56)%          50.9         70.6      (28)%
  Total: Financial guaranty upfront GWP                                   211.8            52.4           304%          358.8         82.0      338%
  Plus: Financial guaranty installment GWP                                 34.0            18.7             82%          58.8         40.0        47%
  Total financial guaranty GWP                                            245.8            71.1           246%          417.6        122.0      242%
  Plus: Mortgage guaranty segment GWP                                       -               0.5              NM           0.5          1.5      (67)%
  Plus: Other segment GWP                                                   -               0.1              NM           3.5          3.4         3%
  Total GWP per income statement                                    $     245.8     $      71.8           242%    $     421.6   $    126.9      232%




           1. For an explanation of PVP, a non-GAAP financial measure, please refer to the appendix.
           2. Some amounts may not add due to rounding.
           NM = Not Meaningful
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Appendix: Reconciliation of Operating Income
to Net Income

($ in millions, except per share data)




                                                                                                                                     Quarter Ended
                                                                                                                                         June 30,
                                                                                                                                    2008        2007
               Operating income                                                                                                   $    38.7 $       46.7
               Plus: After-tax realized gains (losses) on investments                                                                    0.9        (1.3)
                                                                                                                         1
               Plus: After-tax unrealized gains (losses) on credit derivatives                                                        505.6        (12.7)

               Net income                                                                                                         $        545.2         $           32.8

       Per diluted share
           Operating income                                                                                                       $          0.42        $          0.68
           Plus: After-tax realized gains (losses) on investments                                                                            0.01                  (0.02)
                                                                           1
           Plus: After-tax unrealized gains (losses) on credit derivatives                                                                   5.53                  (0.18)
           Net income                                                                                                             $          5.97        $          0.47




     1. The quarter and six months ended June 30, 2008 included a fair value after-tax gain of $5.8 million, or $0.06 per diluted share, and $11.3 million, or $0.13 per diluted
        share, respectively, related to Assured Guaranty Corp.'s committed capital securities.

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Assured Guaranty Contacts:
Sabra Purtill
Managing Director
Global Communications & Investor Relations
Direct: 212 408 6040
spurtill@assuredguaranty.com

Ross Aron
Associate, Investor Relations
Direct 212 261 5509
raron@assuredguaranty.com




Equity Investor Presentation
Second Quarter 2008

								
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